💹 ROI Calculator

Return on investment (ROI) measures how much you gained or lost relative to what you put in. It is expressed as a percentage, making it easy to compare investments of different sizes. A $500 gain on a $1,000 investment and a $5,000 gain on a $10,000 investment both produce a 50% ROI — the scale is irrelevant; the ratio is what matters.

This calculator takes your initial investment, final value, and holding period, then outputs three figures: total ROI, net profit in dollars, and the annualized return (CAGR). The optional additional costs field lets you account for brokerage fees, transaction costs, or taxes paid, which are subtracted from your net profit before the ROI calculation.

Use it to evaluate past investment performance, compare two opportunities side by side, or benchmark a result against a market index. Because the calculator also outputs CAGR, you can make fair comparisons between investments that were held for different lengths of time.

The ROI formula is straightforward:

ROI = (Final Value - Initial Investment) / Initial Investment x 100

Where Final Value is your ending balance and Initial Investment is what you originally put in. If you entered additional costs, those are subtracted from the numerator first.

The annualized return uses the compound annual growth rate (CAGR) formula:

CAGR = (FV / PV)^(1 / t) - 1

Where FV is the final value, PV is the initial investment, and t is the holding period in years. The result is expressed as a percentage per year.

Using the calculator defaults as a worked example: you invest $10,000, it grows to $15,000 over 3 years, and you have no additional costs.

• ROI = ($15,000 - $10,000) / $10,000 x 100 = 50%
• Net profit = $5,000
• CAGR = (15,000 / 10,000)^(1/3) - 1 = (1.5)^0.3333 - 1 = 14.47% per year

The 50% ROI tells you the total gain. The 14.47% CAGR tells you the equivalent rate at which your money grew each year on a compounded basis. Both numbers are useful, but for comparing investments, CAGR is the more meaningful figure.

A 50% ROI sounds the same whether it was earned in one year or ten years. It is not. Raw ROI ignores time entirely, which makes it useless for comparing investments that were held for different durations.

Consider two investments, both showing a 50% total ROI:

• Investment A: 50% over 1 year. CAGR = 50.00% per year.
• Investment B: 50% over 5 years. CAGR = 8.45% per year.

Investment A compounded at nearly six times the annual rate of Investment B, yet the raw ROI figures look identical. If you used raw ROI to compare them you would draw the wrong conclusion.

CAGR, also called the annualized return, normalizes performance to a per-year rate. It is the standard metric used by fund managers, financial analysts, and reporting frameworks like the CFA Institute GIPS standards specifically because it allows apples-to-apples comparisons across different holding periods. Whenever you see "average annual return" in a fund prospectus or investment report, the number is almost always CAGR.

The practical takeaway: use total ROI to measure the absolute gain on a single investment. Use CAGR when you are comparing two or more investments, or when you want to benchmark your result against a market index that reports annualized performance.

There is no single threshold that defines a good ROI. The only meaningful measure is whether your return exceeds the relevant alternative. Common benchmarks:

• S&P 500: approximately 10% annualized total return over long historical periods, or roughly 7% after inflation. This is the default benchmark for broad equity investing.
• Real estate: roughly 8 to 12% total return in appreciating markets, though leverage, maintenance costs, and vacancy rates all affect the real figure significantly.
• Bonds: historically 3 to 5% annualized, though current yields vary with the interest rate environment.
• High-yield savings accounts: currently 4 to 5% in many markets, risk-free. This sets the floor for any investment that carries meaningful risk.

Individual stocks vary so widely that a benchmark comparison is essential. A 15% return sounds strong in isolation; if the relevant sector index returned 35% in the same period, that 15% represents significant underperformance.

Accounting for costs. Fees, taxes, and inflation can each reduce your real ROI by several percentage points. A fund charging a 1% annual expense ratio, held for 20 years, can consume roughly 15 to 20% of your total ending value compared to a zero-cost index fund. Capital gains taxes reduce the net proceeds when you sell. Inflation erodes the purchasing power of your nominal return. The additional costs field in this calculator captures one-time costs; ongoing fees and inflation require separate analysis.

When evaluating any investment, always compare the after-cost, after-tax, inflation-adjusted CAGR against the benchmark you would have earned by doing nothing more than holding a low-cost index fund. That comparison gives you the actual value added.

What is ROI and how is it calculated?

ROI stands for return on investment. It measures the percentage gain or loss on an investment relative to its original cost. The formula is: ROI = (Final Value - Initial Investment) / Initial Investment x 100. A $10,000 investment that grows to $15,000 has an ROI of 50%, regardless of how long that took.

What is the difference between ROI and CAGR (annualized return)?

ROI is the total percentage gain over the entire holding period, with no adjustment for time. CAGR (compound annual growth rate) converts that total gain into an equivalent annual rate, so you can compare investments held for different durations. A 50% ROI over 1 year equals a 50% CAGR, but a 50% ROI over 5 years equals only an 8.45% CAGR. When comparing investments, always use CAGR.

What is a good ROI on an investment?

It depends on the asset class and time period. The S&P 500 has averaged roughly 10% annualized (7% after inflation) over long historical periods, which is the standard benchmark for equity investors. Any investment that meaningfully and consistently beats its relevant benchmark while carrying similar or lower risk represents a genuinely good ROI. An ROI of 8% looks excellent compared to a savings account but weak compared to a bull market equity index.

How do fees and taxes affect my actual ROI?

Both reduce your real return. Annual fund fees compound over time: a 1% expense ratio can reduce ending wealth by 15 to 20% over 20 years compared to a no-cost equivalent. Capital gains taxes reduce net proceeds when you sell, with short-term gains typically taxed at higher rates than long-term gains. To calculate your true net ROI, use the additional costs field to subtract known one-time costs, then apply your applicable tax rate to the net profit figure.

What is the difference between ROI and profit?

Profit (or net gain) is the dollar amount you made: Final Value minus Initial Investment minus any costs. ROI is that profit expressed as a percentage of the original investment. A $5,000 profit on a $10,000 investment is a 50% ROI. A $5,000 profit on a $100,000 investment is a 5% ROI. The dollar figures are identical; the ROI tells you the relative efficiency of the capital deployed.